Interesting news this week from South Africa where the PropTech startup, Flow, has raised R20m in the country’s 'biggest PropTech seed investment to date’.
The Flow solution was born from common pain points experienced in the local South African rental market, but the resulting platform has great potential in all global markets, not least here in the UK, showing once again how PropTech innovations are globally, not just locally, relevant.
The South African rental market is experiencing the same transformation as the rest of the world; so-called generation rent is struggling to afford rising rent levels, let alone save money for a deposit. But South Africa also has another more region-specific rental issue - studies suggest that ‘more than a third of tenants are regarded to be high risk’.
Flow’s solution is to reward tenants for good behaviour - paying rent on time, looking after the property and so on. The startup has partnered with dozens of brands in order to offer these rewards, and if a tenant is ‘fully in flow’, these monthly rewards can reach a value of 20% of their rent. So, it doesn’t seem they’re actually getting rent money back, but that their rent is being offset by other savings on groceries, clothing, etc.
I think it’s a really interesting idea, and it arrives at a time when the rental market, for reasons we’re all aware of, is increasingly discussed in PropTech circles. What I love is that it’s a PropTech solution that has an active focus on the end user, not the industry professional, and not the shareholders.
Such solutions are few and far between. It’s an idea that has great scope for expansion. How great would it be, for example, if Flow could partner with energy providers and reward well-behaved tenants with reduced utility bills?
Tenant empowerment is an area of focus which has arisen through incessant demand from Millennials and, more importantly now, Generation Z.
The ‘bandit reputation’ of the rental sector has been around for decades, but, more so than ever, renters feel hard done by. This sort of solution, although born from a fairly unique South African problem, is exactly the sort of way that global tenants can be given more control, and feel better respected by their landlords.
As I say, rental PropTech solutions are increasingly common. Another good example is innovation around security deposits.
Security deposits and passports
I was speaking to a colleague of mine yesterday and they told me that, having moved flat on December 14, only now had they received their security deposit back. Two months is an awfully long time to wait, and begs the question, what are the holding schemes doing if not increasing efficiency in this area?
It’s a question a lot of people have asked recently, and the answer has been far from easy to provide. So too, however, has been identifying and supporting a tech-driven solution.
Many companies have tried to usurp the government-backed deposit schemes to varying levels of success. The sector is a hybrid of FinTech and PropTech, maybe even InsureTech.
In the US, TheGuarantors, a company which is ‘improving tenant / landlord relationships through innovations in product development and delivery’, added a security deposit alternative to its arsenal of features.
Here at home, Reposit is trying to erase the huge lump sum that tenants have to hand over, often before receiving their previous deposit back.
Because the security deposit is an important safety net for landlords, uptake of alternatives has been relatively slow - persuading all involved that an alternative is better than the tried and trusted is difficult. Going back to Flow, perhaps proof of good behaviour is the way to address security deposits, too?
Certainly a number of PropTech startups hope so, hence the rise of tenant passports. Companies such as RentalStep are offering tenant and landlord-facing platforms which help prospective renters prove that they pay rent in a timely manner, do not damage property, etc.
Whereas Flow is using this information to offer rewards, tenant passports aim to increase the efficiency of referencing and perhaps help landlords to feel more secure in offering more tenant-friendly security deposit alternatives.
What about the agents?
All of this effort to improve the tenant experience is great and, in many ways, long overdue.
However, agents and professionals aren’t being ignored. A couple of weeks ago, I wrote about AskPorter’s new product, Porter Pioneers, a programme that will ‘help automate the workflow of letting agents and other firms in the sector’.
Using Artificial Intelligence and Google’s Home Assistant voice technology, agents are able to execute admin tasks such as arrange viewings and vet tenants.
Agents also benefit from the customer-facing solutions, too. By offering a more streamlined, more affordable experience by deploying tech solutions, high street branches can nullify much of the online hybrid threat by offering everything they do and more.
I do, however, have concerns that AI like Porter Pioneers will leave agents with time to kill. The question is, how will you fill that time?
The most proactive professionals will use it to close more deals, pursue more leads, spend more face time with clients. Other less proactive agents will see their value take a profound tumble.
I applaud all of these rental innovations - the sector desperately needs them and I hope to see more and more startups coming to help agents and tenants alike, streamlining the process and increasing fairness.
Importantly, we need to be aware that many of the best solutions could well arrive from overseas, a finger must be kept on the pulse of international PropTech.
We do, however, always need to make sure we are championing platforms which genuinely create better journeys and experiences. We don’t want to end up with tech solutions taking over the market which essentially force one or both sides of the rental deal into a compromise.
Lateral thinking, like offering rewards for good behaviour, is a win-win solution which the industry and its professionals would be wise to embrace. In many ways, the bullish and self-assured approach of our younger generations means they simply have to.